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Posted on April 21st, 2014, by

The main aim of the project is to discuss austerity measures during the Reagan administration, and to understand the educative necessity of their observation.

To begin, we need to remind the meaning of the term “austerity measures”¯ for the purpose to provide deeper analysis of their implementation. In such a way, according to Schaller (1994), “austerity measures are strict measures that are undertaken by a government to help bring expenditures more in line with revenues”¯. This means that in economics, the term “austerity”¯ refers to a policy aimed at deficit-cutting area, and this policy is provided by making spending lower via a specific reduction in the amount of existing benefits and some services provided to general public. It is a truth that all governments use austerity measures to try to somehow reduce their deficit spending and the Reagan administration was not an exception in this area.

Observing the activity of Reagan administration, it becomes obvious that issues posed by Ronald Reagan, and fears that he expressed were not far-fetched; but he was rather optimistic, saying that the country has a lot of problems, while opportunities to solve all of them are limitless. For instance, a key element in the system of activities of the Reagan administration, declared for the purpose to decentralize functions to manage the economy and promote private enterprise, this “engine”¯ of economic and technological progress, included the amortization and tax reform.

Being more specific, we can state that Ronald Reagan, after becoming a president of the United States, presented to Congress economic recovery program, which included four key elements: reform to reduce the cost of federal expenditures, a set of proposals for the creation of new jobs and shortening of taxes for personal profit at 10% per year during three years; and long-term program of deregulation. These austerity measures were provided to save the country and help to make it prosperous, and the main task of the economic recovery program was included in strengthening shaky position of the U.S. imperialism on the world stage. It can be even mentioned that the concept of economic policy of the U.S. administration, is often called “Reaganomics”¯, and has a pronounced class character. Its main provisions reflect the interests of the monopoly bourgeoisie, and were used to set goals which methods were directed against the social gains of the working masses.

Returning to the very economic recovery program, we can add that it was mainly focused on a significant change in the correlation between consumption and accumulation in favor of accumulation, between groups with different benefits in favor of the affluent segment of the population, between the cost of the military and civilian needs in favor of the military. So, according to Johnson (1991), the program was based on the interests of large corporations and groups with high profits and the envisaged to overcome the economic difficulties due to low-paid part of the American working union.

Thus, taking into consideration all the above mentioned, we can conclude that the Reagan administration made a hyperpolarization between the poor and the rich, redistribution in favor of the rich, while at the same time, the number of those living below the poverty line was increased. In such a way, tax policy to stimulate investment activity, elevated the status of the richest Americans and enabled the opportunity of the “middle class”¯ to improve their financial situation. Of course, any historical event and economic activities provided by different U.S. administrations allowed people to learn a lot of useful lessons from their experience. In such a way, we have learned the steps provided by the Reagan administration, and found that despite of everything Reagan was able to overcome the economic downturn that started under Carter, to reduce inflation and unemployment, to bring down income taxes, to accelerate economic recovery, and to suppress the strike movement.

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